Apple (AAPL): That’s a Hell of a Loss

By Nov 18, 2012, 1:41 PM Author's Blog  

Pot Stocks

So last Monday morning you take a flyer on MDBX. You plunk down four grand for a thousand shares. By the close on Thursday, the shares are worth over $200k (5000%). It’s tank city on Friday however. The stock opens $100 lower, and settles down 90% on the day.

Apple (AAPL): That’s a Hell of a Loss

(click to enlarge)

MDBX makes vending machines for marijuana. That might prove to be an okay business some day. But for the market cap of the company to go from $500m to 24B in four days is absurd. The CEO of MDBX agreed, he said so, and that was the cause of Friday’s rout:

“We temper investor expectations at present price points.”

MDBX trades in the Pinks, and there was not much volume (a few million shares did change hands in the fray).

I think this story is funny, but it’s no joke. $24B was created out of thin air for a few days. Most of the paper gains were vaporized on Friday. That’s Madoff sized money. I’m thinking pot smokers shouldn’t trade stocks.

Facebook (FB) Shorts

Face Book had a great week. Up 23% in a down market. I’m sure that some folks will feel better when they look at their statements this weekend. Some will be thinking, “FB must be making progress on that mobile problem”. Actually, the move in the stock has nothing to do with the fundamentals at all.

800m shares of FB got freed up this week; a bunch of money was positioned short in the stock waiting for some new sellers to appear. Of course when everyone knows all this well in advance, and CNBC is talking it up non-stop, the opposite has to happen. So the shorts got creamed, and I got a laugh.

I have no idea what the right price for FB is. I do know that the current price is a composite of these factors:

- A significant amount of the current float is still held by retail accounts that own it from the IPO at 38. They all hate the stock.

- At $23 a share, and a big float, FB is perfect trading fodder for all sorts of players:

  • Day traders
  • Short interest
  • Momentum guys
  • Hedge funds
  • Robots

Generally speaking, that crowd of actors is bad news for the widows and orphans.

Apple Sauce

Apple’s losses since 9/21 are now at a massive $163B. That’s equivalent to the annual GDP of Pakistan or the state of South Carolina. The market cap loss is greater than the value of either Wells Fargo or Coke. The loss is equal to the combined values of Walt Disney and McDonalds. That’s a hell of a loss.

My thinking is that Apple (AAPL) never deserved to be a $700 stock. The price move from $500 to $700 was not justified. So now that we are back to the starting point, what’s next?

I’ve listened to the touts on TV for the past several weeks. Damn near every one of them has been long, and doubling up all the way down (if you believe what they say). One guy was screaming that it was a “generational buy”. Maybe. The bets still seem to be lined up on one side.

I’m going to stay away from this name for a bit longer. The stock is way too “loved”. After all, it’s just a phone, an expensive one at that.

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2 Comments

  1. TinCan2012 says:

    AAPL is oversold, not over bought. Your “thinking” that AAPL did not deserve to be a 700 stock, with it’s profit statements, growth and shrink P/E. Absolutely no support, just a glib statement of your personal opinion. Bruce, do not give up your day job, whatever that is.

  2. miksnd says:

    Its just a phone? How bout the millions of ipads and ipad mini’s and macbooks and imacs that it will sell up to the New Year? How bout the fact that the iphone has replaced all point and shoot cameras (have you looked at the quality of the images) and how bout the fact that the apps and ease of use and user interface are what it really is all about? The stock is going thru sell off as everyone is taking profits to avoid capital gains before the year end and look at the trend line that it is falling into right now?

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